USD is likely to weaken further in 2023 after a choppy end in 2022 – HSBC
|The broad US Dollar tore between opposing forces last month, with the USD Index (DXY) ending the month lower. Economists at HSBC look for USD weakness in 2023.
A US economic soft landing should see the USD broadly weaken
“We believe the USD will weaken further in 2023, as its significant overvaluation (based on the real effective exchange rate (REER) can no longer be supported, once the Fed stops hiking, global growth shows signs of troughing and market volatility comes down.”
“We acknowledge there would be ‘safe-haven’ demand for the USD, if the US economy goes into a deep recession. However, we see that as a risk scenario, rather than an inevitable outcome.”
“If the US economy manages a softer descent, the USD is likely to weaken. That is our base case for 2023.”
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